8 out of 10 Motor Dealerships in the UAE will fail within their first 2 years of trade. Running a car dealership in the UAE is not an easy task. From sourcing Stock to VAT Reporting, there are so many things to do on a daily basis.
With so many things to do many UAE car dealers get side-tracked working in the dealership instead of on the dealership.
This brings us to the question, why do so many car dealerships in the UAE fail? In short, there are many different reasons, but we have narrowed the list down to just 6.
Here are the 6 main reasons Why UAE Car Dealerships Fail and How Your Dealership Can Avoid Them:
No Business Plan
To be successful selling cars in the UAE, dealers need to have a sufficient business plan. A business plan is the foundation of which dealers should base future business decisions on.
Your Business Plan should answer essential questions like:
- Why are you becoming a Car Dealer?
- What do you want to achieve?
- How many cars do you want to sell every month?
- How will you source car stock?
- What type of cars do you want to sell?
- What is your ideal customer?
- How will you market to customers?
Before starting a car dealership, it is so important that you know what you want to achieve and how you will go about achieving it.
Research the UAE motor industry, identify your target market and find different ways you can capture the customer.
Related article: What Customers Look for In A Dealership.
Having No Goals or KPIs
One of the biggest mistakes UAE dealers make is not having any goals or KPIs. Goals and KPIs are a key factor for success in any industry. If your dealership doesn’t have clear and concise goals and KPIs you could be losing thousands!
How will you know if you’re selling enough cars? How would you know if your dealership is generating profit? How would you know if your dealership is growing? How will you know if your sales staff is selling? The answer is you wouldn’t. If you go months of not knowing essential dealership information you could quickly find yourself in a hole that may be difficult to get out of.
To be successful, UAE motor dealers MUST have goals and KPIs. Set different Goals that you want your dealership to achieve, inform your staff of your goals, let them know what is expected of them and frequently report on the results.
The benefit of having Goals and KPIs in your dealership is you will instantly know if you are performing or if you are not. You can instantly implement changes to areas that need improvement.
Related Article: Why UAE Dealers MUST track KPIs.
High Overheads & Overspending
It doesn’t take a genius to realise that if your business can’t keep costs down – you will quickly go out of business.
To minimise the risk of insolvency dealerships in the UAE need to accurately assess all business costs and identify different ways to minimise expenditure. Many dealerships fall into the trap of sourcing too much stock. The problem with this is if it doesn’t sell quickly your bottom line will take a hit.
Research the market, find out what cars are popular, what customers are looking for and source stock that can sell quickly and generate a healthy profit.
Like anything, the only way to keep your costs down is by frequently assessing your dealerships position and shopping around for cheaper options.
Related Article: How UAE Motor Dealers Can Improve Reporting.
Not adjusting to market conditions
The UAE Automotive Industry is continuing to change. The way dealers sold cars 5 years ago is much different to the way cars are sold in 2021. To be successful, dealers must adapt to the changing market.
Understand where customers are finding motor dealers, how they are finding them and what they are looking for. Have all the tools in place that customers seek and make your sales process easy.
Related article: 3 Online Trends Changing the UAE Motor Industry.
Not understanding the competition
Selling cars in the UAE is extremely competitive. To stay ahead, dealers must frequently research the competition. Find out what they are selling, how they are capturing a customer, their pricing, and try to find a way to match or better their prices.
Not using a dealer management system
Dealers in the UAE are busier then ever! You simply don’t have the time to sit down and complete manual administration tasks.
To maximise sales and profitability, Dealers in the UAE MUST use a dealer management system to streamline and automate the common day-to-day tasks like Stock Management, VAT Calculations, Advertising and Reporting.
Related article: 6 Reasons Why UAE Car Dealers Need A Dealer Management System.
Running a motor dealership in the UAE is no easy job. Many dealerships will enter the market but only those who plan and stay focused will succeed. Addressing the 6 points mentioned above will put your dealership in a strong position for future growth.
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EasyCars by Jeal is a UAE industry-specific, web-based dealer management system that simplifies and automates the buying and selling of motor vehicles in the UAE.
EasyCars includes everyday features like Stock Management, Automated Advertising, VAT Compliance, Business Reporting, and Integrated Accounting – everything you need to run a successful motor dealership in the UAE.